Lifetime ISA withdrawal rules: penalty maths and the £450,000 cap
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The 25% unauthorised withdrawal charge hits your own savings as well as the government bonus. First-home buyers must watch the frozen £450,000 property limit — exceeding it triggers a penalty on the whole withdrawal.
By Money Guide editorial team
Published:
HMRC charges 25% of the gross amount withdrawn unless you buy a first home up to £450,000 (after 12 months, with a mortgage), reach age 60, or qualify for terminal illness withdrawal.
On £5,000 saved (£4,000 plus £1,000 bonus), an unauthorised full withdrawal returns £3,750 — £250 less than you paid in. Partial withdrawals face the same percentage.
Funds for a home purchase go to your conveyancer at completion, not your bank account. Tell your solicitor early.
The property cap has been frozen since 2017 while prices rose in many regions. Treasury consultations continue but no 2026/27 increase is confirmed.
See our Lifetime ISA withdrawal rules guide and overview page before opening or cashing in.